Canadian Lawyer InHouse

Apr/May 2009

Legal news and trends for Canadian in-house counsel and c-suite executives

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By Henry Dinsdale and Jeff Goodman Class actions Are wage and hour actions here to stay? W age and hour class ac- tion litigation in the U.S. has led to many large settlements and damage awards. But it took a $650-million class action against CIBC for unpaid overtime pay to make Canadian employers aware of the real risk this type of claim poses. Similar actions pushed Canadian employers to question their exposure and ask what pre-emptive steps they can take to minimize their po- tential exposure. Class actions start when a large num- ber of potential plaintiffs, usually each with a relatively small claim, form a class to commence proceedings against a common defendant. A representa- tive plaintiff then litigates the claim on behalf of the class. In Ontario, where most of the Canadian cases have originated, class actions are governed by the Rules of Civil Procedure and the Class Proceedings Act (CPA). A class action must be cer- tified to proceed to trial. Certification requires: the pleadings to disclose a cause of action; an identifiable class of two or more persons; common issues for all class members; compelling rea- sons why it is the preferable method to resolve the common issues; and the representative plaintiff would fairly and adequately represent the interests of the class. The most contentious criterion in wage and hour certification motions is whether a class action is the preferred method for proceeding. Employers must convince the courts that an alternate procedure meets the three major goals of the CPA: access to justice, judicial economy, and modification of behav- iour. Without evidence to the contrary, judges tend to presume class proceed- ings are the preferable procedure. Most provinces have employment standards tribunals where unrepre- sented employees can file overtime pay claims. Is this a more appropriate meth- od of proceeding? The British Columbia Court of Appeal in Macareg v. E Care Contact Centres Ltd. recently ruled that statutory claims for unpaid wages could not proceed by class action and each claim must be filed individually with the B.C. Employment Standards branch. Wage and hour actions have been in use since the mid 80's in the U.S. Several large judgments have been awarded against employers, including a $185-mil- lion judgment against Wal-Mart for unpaid overtime pay. Since 2007, four major wage and hour class action lawsuits have been launched in Canada against major national employ- ers, CIBC, KPMG LLP, Scotiabank, and CN Rail, with unpaid overtime claims in excess of $1 billion. In Fresco v. Canadian Imperial Bank of Commerce, CIBC is facing Canada's largest unpaid overtime class action suit. The pending decision on the certification motion will have an enormous impact on the viability of wage and hour class actions in Canada. It is no coincidence that three of these four class actions have targeted large, federally regulated employers. Identical overtime standards apply to all federally regulated employees. Certifying a multi- jurisdictional class action against provin- cially regulated employers may prove far more difficult as employment standards can vary widely between Canadian prov- inces. The only sure way to avoid an over- time class action is to comply with the applicable employment standards legislation. For this, employers must fully understand their legal obligations. Common issues that may trigger lia- bility include: a misconception that salaried employees are not entitled to statutory overtime pay; mis-classifying employees as exempt; poorly enforced overtime policies; poor record keeping; and treating certain types of work as off-the-clock, i.e. clean up before and after shifts. Adopting the following best practices can help avoid overtime class actions. Perform regular audits of your over- time policies. Verify who is entitled to overtime and that statutory exemptions are applied properly. Keep accurate, up- to-date records and review them with employees regularly. Ensure all working time is considered. Clearly communicate the overtime policy to all employees. Enforce overtime policies consistently and regularly. Employers may also wish to address overtime liability by making alternate arrangements with employees (e.g. time- off-in-lieu-of-pay agreements or com- pressed work-week "averaging agree- ments"); seeking a permit allowing non- payment of overtime; restructuring the employment relationship to fall within an exemption; clearly setting out when overtime pay is triggered, in Ontario, as high as 44 hours worked in a week. For employers with potential liabil- ity, it may be prudent to enter into voluntary repayment plans to avoid the risks of costly litigation and adverse publicity. Class actions are enormously expen- sive to litigate even where the employer is successful. Canadian employers are well advised to pay close attention to how their overtime policies are applied and enforced. IH Henry Dinsdale and Jeff Goodman are labour and employment law partners with Heenan Blaikie LLP in Toronto. INHOUSE APRIL 2009 • 7

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